When you find a good flip with some profit margin, it likely has a thing or two wrong with it (did you read this in a sarcastic voice? We hope so). Did you get the property inspected prior to purchase? Of course you did, you’re a pro! Anyway, it is not your home that you are going to take care of for the next 30 years, so time is of the essence. But what do you fix? It can’t be everything, even with a good investment property loan. There simply isn’t time/hard money/margin for everything. Here are some things you need to think about to gauge the consequences of missed or miscalculated rehab costs — and remember, time is literally money here. Consider:
- The direct cost of the improvements
- The cost of the extra time you need to make the improvements (interest, property taxes, utilities)
- Will the extra time take you to an unfavorable selling season? Are comps trending down?
- Are there opportunities you will miss out on due to the extra time these improvements will take?
If the home has a structural, electrical, or plumbing issue, it is going to be less costly to do all fixes necessary as soon as possible. Should the buyer call out an item from an inspection, fixing the problem at that late stage could cost significantly more than if it were done at the beginning.
Get experienced guidance about your real estate investment from Colorado’s hard money lenders. Contact the TABS, LLC. team today to learn more and start your hard money loan application.